Japanese investors infer carefully what the BOJ survey implies

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Bank of Japan released Tankan survey


 Some investors may sense a harbinger of one the worst economic depressions to come in the BOJ survey. 

 According to Tankan report, a short-term economic observation survey of corporate sentiment for March 2020 released by the Bank of Japan, the index of the economic judgment of the large manufacturing companies dropped to minus territory for the first time in seven years due to the spread of Covid-19 infection. 

 The index of large manufacturing companies dropped to minus 8 points for the fifth consecutive quarter and the first minus result since March 2013. 
Japanese investors infer carefully what the BOJ survey implies

 Stagnating demand around the world due to the spread of Covid-19 has suppressed production activities in automobile and steel industries as factories operation of those industries is downed. 

 The index of large non-manufacturing companies also fell 12 points from the previous survey. In particular, hotel, food and beverage services were rapidly deteriorating. 
Japanese investors infer carefully what the BOJ survey implies

 Sharp decline in foreign tourists and self-restraint of wide range of economic activities caused the index for those indutries to drop abruptly from 11 to minus 59, the lowest ever. 
Japanese investors infer carefully what the BOJ survey implies

 With regard to the future outlook, it is expected that the index of the large manufacturing companies will worsen to minus 11, and the non-manufacturing will decrease to minus 1 with negative effects of Covid-19 infection spreading to the entire economy and business managers' sentiments rapidly deteriorating. 

 In addition, it is concerned that the corporate sentiments will further deteriorate reflecting the recent worsening situation in Europe, the United States and Japan, and the record price decline in the stock market because 70% of companies surveyed had responded by the beginning of March before the situation got worse. 

 In the past prolonged depressions, index of non-manufacturing results fell with forecast index but its drop rate was larger than that of forecast index during preceding period of depressions. In this Tankan survey, this omen was found predicting stagnating economy to come. 

 Now the Japanese government has finally declared a state of emergency to step up efforts to prevent a further escalation in the Covid-19 outbreak, business conditions will become graver.

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